What Is a Holding Company in Ontario?

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What a holding company is in law

“Holding company” is a business term rather than a type of corporation. A holding company is an ordinary corporation, usually incorporated under the same Business Corporations Act (the OBCA) as any other, whose main purpose is to hold shares, most often the shares of the owner’s operating company. Instead of owning the operating company yourself, you own the holding company, and the holding company owns the operating company.

The OBCA has its own words for the relationship. Under section 1(5), a corporation is controlled by another if that other holds voting shares carrying more than 50 percent of the votes for electing directors, enough to elect a majority of the board. Section 1(2) makes the controlled company a subsidiary, and section 1(3) makes the controlling company its holding body corporate. Section 1(4) treats companies as affiliated if one is the other’s subsidiary, both are subsidiaries of the same company, or both are controlled by the same person.

Why owners use one is mostly a tax and planning question, and the general reasons are set out in the share structures and holding companies section of our corporate law page. This page deals with the legal mechanics: how the structure is built and what it changes in your records, your agreements and your estate plan.

How the structure is set up, step by step

Plan it with your accountant first. The order of the steps, the share terms and the timing usually follow the accountant’s plan, because the tax result depends on them.
Incorporate the holding company. It is incorporated like any other company, for the same $300 Ontario fee, and can be a numbered company. The filing steps are in how to incorporate a business in Ontario. The naming choice is covered in numbered company or named company in Ontario.
Put the operating company’s shares in the holding company. For a new business, the operating company issues its shares directly to the holding company. Section 4(1) allows a corporation to be an incorporator, and section 23 lets the directors issue shares once they are fully paid. For an existing business, your shares are usually transferred to the holding company, often in exchange for shares of the holding company.
Value any shares issued for property. Where shares are issued for property, such as shares of another company, section 23(4) requires the directors to determine the amount of money the corporation would have received had the shares been issued for money.
Update both minute books. Each company records the resolutions, and the operating company’s securities register and register of transfers show the holding company as the shareholder (section 141).
Update both significant control registers. The people behind the holding company remain individuals with significant control over the operating company, as explained below.
Review the shareholders’ agreement. If there is one, the holding company now has to be a party to it, and the agreement should still work with the new structure.

Owning your operating company personally, or through a holding company
Point	You own the operating company	A holding company owns it
Registered shareholder of the operating company	You	The holding company (securities register, s. 141)
Relationship under the OBCA	Not applicable	Holding body corporate and subsidiary, if it holds more than 50 percent of the votes (s. 1(2), (3), (5))
Who signs shareholder resolutions of the operating company	You	The holding company, through its authorized signer
Directors	Individuals only (s. 118(1))	Still individuals only; the holding company cannot be a director
Individuals with significant control of the operating company	You, as registered holder	Still you, through indirect control (s. 1.1(2))
Corporate records and filings	One company	Two companies, each with its own records, initial and annual returns, and T2 tax return
What your will deals with	Your shares of the operating company	Your shares of the holding company

What changes the answer

Significant control does not disappear

A holding company does not hide who owns the business. Section 1.1(2) of the OBCA counts as an individual with significant control anyone who is the registered holder or beneficial owner of 25 percent or more of the voting rights or value, or who has direct or indirect control or direction over those shares. Ontario’s guidance adds that direct or indirect influence over the corporation can be enough. So the owner of a holding company is usually listed in the operating company’s register under section 140.2, as well as in the holding company’s own. We explain the register in what is the register of individuals with significant control.

No cross-ownership

Section 28(1) says a corporation must not hold shares in itself or in its holding body corporate, and must not let its subsidiaries hold its shares. The operating company cannot own shares of the holding company that owns it.

Two sets of records and filings

Each company is a separate corporation. Each must keep the records in section 140, file its own initial return within 60 days of incorporation and annual returns under the Corporations Information Act, and, according to the Canada Revenue Agency, file a T2 corporation income tax return every tax year even if no tax is payable and even if it is inactive. A holding company that only holds shares still has those obligations. Keeping both minute books current is part of the minute book work every company needs.

Partners with their own holding companies

Where two or more owners each hold their shares through their own holding company, the operating company’s shareholders are the holding companies. The shareholders’ agreement then has to bind both the companies that hold the shares and, often, the people behind them, so that a change in who owns a holding company is treated like a change in the operating company. Our article on what a shareholders’ agreement should cover lists the clauses that usually matter.

Selling the business later

A buyer may want to buy the operating company’s shares from the holding company, or its assets from the operating company. The structure affects who the seller is and who signs, which we compare in asset sale or share sale.

Your estate plan

Once a holding company owns the business, your will deals with the holding company’s shares, not the operating company’s. Shares of a private holding company are often the kind of asset owners place in a secondary will, as explained in do you need a secondary will for your private company shares. If you become unable to manage your affairs, the person you name in a continuing power of attorney for property can deal with those shares, so the document should give them clear authority to do so. How the pieces fit is in our estate planning for business owners section.

Tax

The tax reasons for a holding company, and the tax risks, are often the main driver, and they belong with your accountant. The Canada Revenue Agency’s corporations pages list each corporation’s own filing and payment obligations; this page gives no tax advice.

Example

For example, imagine Raj and Mei, who own a Vaughan logistics company 50/50. On their accountant’s advice, each incorporates a numbered holding company, and each transfers their operating company shares to their own holding company in exchange for shares of it. The operating company’s directors pass resolutions approving the transfers, its securities register now shows the two holding companies as shareholders, and the register of transfers records both transfers.

Raj and Mei are still the individuals with significant control of the operating company, because each controls 50 percent of the votes indirectly, so the register lists both of them and explains the holding company in between. Their shareholders’ agreement is amended so the two holding companies are the parties, with Raj and Mei signing personally too, and a sale of either holding company counts as a sale of shares. Each of them also updates their will and power of attorney to deal with the holding company shares. There are now three companies, each with its own minute book, annual return and T2 return.

Common mistakes

Transferring shares without the paperwork. Without resolutions and updated registers, the operating company’s records still show you as the owner.
Leaving the significant control register unchanged. The individuals behind the holding company usually still belong in it.
Forgetting the shareholders’ agreement. If the holding company is not a party, the agreement may not bind the actual shareholder.
Treating the holding company as a formality. It needs its own minute book, annual returns and tax returns every year.
Naming the holding company as a director. Section 118(1) says a director must be an individual.
Not updating the will. A will that leaves “my shares of the operating company” may miss the shares you now actually own.

What to do this week

Ask your accountant whether a holding company fits your numbers and goals, and in what order the steps should happen.
Pull together the operating company’s articles, registers and any shareholders’ agreement.
List who owns the operating company’s shares today, and in what classes.
Decide whether the holding company will be numbered or named, and who its directors will be.
Note which documents name you personally as a shareholder, such as the shareholders’ agreement, your will and your power of attorney.
If family members may hold shares too, read bringing family members into your company.
Book a review of the corporate and estate documents together. A first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Is a holding company a different kind of corporation?

No. It is an ordinary corporation under the OBCA or the federal Act. What makes it a holding company is what it owns. The OBCA calls it a holding body corporate when it controls a subsidiary.

Can one person own a holding company and an operating company?

Yes. One individual can own all the shares of the holding company and be the only director of both companies, since each needs at least one individual director.

Can a holding company own shares of more than one company?

Yes. A corporation has the capacity of a natural person under section 15 of the OBCA, so it can hold shares of several companies, subject to its articles.

Does the holding company need its own bank account and records?

It needs its own records under section 140 and its own filings. Whether and how it banks is a practical and accounting question, but keeping its affairs separate from the operating company’s supports the separation the structure relies on.

Can the operating company own the holding company?

No. Section 28(1) bars a corporation from holding shares in its holding body corporate.

Will a holding company reduce my taxes?

That is a question for your accountant. We set up the legal structure to follow the tax plan, not the other way round.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

What is a holding company, and when do Ontario owners use one?